Cours avancé « Economie des inégalités » (Master APE, année M2)

Advanced course « Economics of Inequality » (Master APE, M2 year)


Thomas Piketty

(EHESS, Paris School of Economics)


Année universitaire/Academic year 2009-2010



(version 22/10/2009, TO BE COMPLETED)

(relevant course material will be made available on-line at least one week before each course)



Campus Paris-Jourdan, 48 boulevard Jourdan, 75014 Paris, salle E101 (pavillon E)   

Tuesday 9h30-12h30

8 courses of 3-hour each

29/9/2009, 6/10/2009, 13/10/2009, 20/10/2009, 27/10/2009, 3/11/2009, 10/11/2009

(no course on 17/11/2008 ; course 8 date yet to be set).

Email :

Course web page :


Le principal objectif de cours est de présenter des travaux récents portant sur l’économie des inégalités et de suggérer des pistes de recherches à des étudiants souhaitant travailler dans ce domaine. La question des inégalités sera envisagée à la fois d’un point de vue historique (comment les inégalités de revenus et de patrimoines ont-elles évolué depuis le 19ème siècle, et comment peut-on rendre compte de ces évolutions ?) et d’un point de vue théorique (modèles positifs de la dynamique des inégalités, théories normatives de la taxation et de la redistribution optimales, etc.). Une place importante sera également accordée aux évolutions les plus récentes et à leurs implications en termes de politiques économiques et sociales (quel sera l’impact de la crise actuelle sur la structure des inégalités ? comment se présente la question de la redistribution en ce début de 21ème siècle ?). Une participation active des étudiants est demandée. Les étudiants cherchant un sujet pour leur mémoire de M2 sont invités à consulter l’ensemble des thèmes mentionnés dans cette liste de lectures et dans les listes de lecture des années précédentes.


The main objective of this course is to present recent research in the area of income and wealth distribution and to suggest research topics to students wishing to work in this domain. The issue of inequality will be treated both from an historical perspective (how did income and wealth distributions evolve since the 19th century, and how can we account for these changes?) and from a theoretical perspective (positive models of income and wealth distribution dynamics, normative models of optimal taxation and redistribution, etc.). The course will also address the most recent evolutions and implications for economic and social policies (what will be the impact of the current crisis on the structure of income and wealth distributions? what are the prospects for redistribution in the early 21st century?). An active participation of students is requited. Students looking for a topic for their master dissertation are requested to examine all areas covered in this syllabus, as well as in the syllabus of previous years (available on-line).


Teaching language. The course will be bilingual. The primary teaching language will be French. However (1) all teaching material – course notes as well as research papers – will be in English, and is available on-line, so that non-French speaking students can easily prepare courses and questions  ; (2) non-French-speaking students are encouraged to ask as many questions in English as they want, and I will always answer in English; in effect, if the demand for English – as measured by the number and frequency of questions in English – is sufficiently strong, the course will switch almost entirely to English; (3) in case there are students whose understanding so French is so poor that the rules described above turn out to be inadequate, the course will switch automatically to English. The reasons for keeping French as the default language are threefold: (1) it is much more fun for me to teach in French, and this is one of the good things that convinced me to return to France; (2) my English is really bad, and I think it is much more productive for French-speaking students to hear me teach in French; (3) it cannot be that bad for non-French-speaking students to learn a little bit of French by the end of the course.


Course validation. There will be no formal exam. In order to validate the course, students are required (1) to attend and actively participate to all classes; (2) to send me by email before 10/1/2009 a “referee report” (2-5 pages) on a research paper chosen in this syllabus (or in the syllabus of the previous years); the report must be written in English and must provide a crystal-clear summary of the original contribution of the paper, adequate references to the relevant literature, and an assessment of the strength and weaknesses of the paper [exemples of referee reports]


Course material. Some of the course material – primarily course notes and selected tables and graphs extracted from key references – will be distributed in hard copies during each class. This corresponds to “HC” material in the following reading list. However most of the material will not be distributed in hard copies and will solely be available in electronic format on-line. Students are requested to read (and print if they so wish) this supplementary material before the class. Two-star references ** are compulsory reading. One-star references * are highly recommended. Other references provide useful readings for students wishing to explore the specialized literature in the relevant area, but will not be presented in a detailed manner during the class.


General references on the economics of income & wealth distribution


A.B. Atkinson, The economics of inequality, Clarendon Press, 1983

A.B. Atkinson et F. Bourguignon (éd.), Handbook of Income Distribution, North-Holland, 2000

A.B. Atkinson et T. Piketty (éd.), Top incomes over the twentieth century – A contrast between continental european and english-speaking countries, Oxford : Oxford university press, 2007

A.B. Atkinson et T. Piketty (éd.), Top incomes over the twentieth century – A global perspective, Oxford : Oxford university press, 2010

G. Bertola, R. Foellmi & J. Zweimuller, Income distribution in macroeconomic models, Princeton University Press, 2006

D. G. Champernowne and F. Cowell, Economic Inequality and Income Distribution, Cambridge University Press 1998

T. Piketty, L’économie des inégalités, éditions La Découverte, collection « Repères », 1997

T. Piketty, Les hauts revenus en France au 20ème siècle – Inégalités et redistributions, 1901-1998, Grasset, 2001

B. Salanié, Théorie économique de la fiscalité, Economica, 2002 




Part 1 : Income and Wealth Distribution – Models and facts



Week 1. Capital vs Labor – Basic models and facts



** Course Notes A : Basic Models of Inequality – Capital vs Labor

[Course Notes A (in html format)] HC


** National Income and Wealth Accounts

 [Tableau économique d'ensemble, TEE, France 2007 (in excel format)]

[Selected tables in pdf format] HC


** Course Notes B : Capital share & wealth-income ratio – Illustration using national accounts

[Course Notes B (in html format)] HC



Weeks 2 & 3. Wealth accumulation and distribution – Models and facts



** Course Notes C : Models of Wealth Accumulation – Life-cycle vs Dynastic Models

[Course Notes C (in html format)] HC



(i) Modigliani-Kotlikoff-Summers controversy on inheritance share in aggregate wealth


* Kotlikoff, L and L. Summers, “The Role of Intergenerational Transfers in Aggregate Capital Accumulation”, Journal of Political Economy 89 (1981), 706-732 [article in pdf format]


* F. Modigliani, “Life Cycle, Individual Thrift and the Wealth of Nations”, American Economic Review 1986 [article in pdf format]



Kotlikoff, “Intergenerational Transfers and Savings”, Journal of Economic Perspectives 1988 [article in pdf format]


Modigliani, F. « The Role of Intergenerational Transfers and Lifecyle Savings in the Accumulation of Wealth », Journal of Economic Perspectives 1988 [article in pdf format]



(ii) Long-run changes in wealth concentration and age-wealth profiles


** T. Piketty, G. Postel-Vinay et J.L. Rosenthal, “Wealth Concentration in a Developping Economy: Paris and France, 1807-1994”, American Economic Review, 2006 [article in pdf format]

 [Selected tables in pdf format] HC


** W. Kopczuk et E. Saez, « Top Wealth Shares in the United States, 1916-2000 – Evidence from Estate Tax Returns », National Tax Journal 2004 [article in pdf format]

[Selected tables in pdf format] HC


* J. Roine and D. Waldenstrom, “Wealth Concentration over the Path of Development: Sweden, 1873-2005”, mimeo 2007 [article in pdf format]

[Selected tables in pdf format] HC



(iv) Other recent theoretical and empirical research on wealth distributions


* A. Atkinson, “Concentration Among the Rich”, mimeo, 2006 [article in pdf format]


J. Benhabib and S. Zhu, “Age, Luck and Inheritance”, mimeo 2008  [article in pdf format]


A. Castaneda, J. Dias-Gimenes and V. Rioss-Rull, “Accounting for the U.S. Earnings and Wealth Inequality”, Journal of Political Economy, 2003 [article in pdf format]


C. Caroll, “Why Do the Rich Save So Much?”, 2000 [article in pdf format]


* J. Davies, S. Sandstrom, A. Shorrocks and E. Wolff, “The World Distribution of Household Wealth”, mimeo 2006  [article in pdf format]


M. Cagetti and M. DeNardi, “Wealth Inequality: Data and Models”, NBER Working Paper 12550, 2006 [article in pdf format]


W. Kopczuk and J. Lupton, “To Leave or Not To Leave: The Distribution of Bequest Motives”, Review of Economic Studies, 2007  [article en format pdf]


W. Kopczuk, “Bequest and Tax Planning: Evidence from Estate Tax Returns”, Quarterly Journal of Economics 2007 [article in pdf format]


D. Krueger and A. Ludwig, “On the Consequences of Demographic Change for Rates of Return to Capital, and the Distribution of Wealth and Welfare”, NBER Working Paper 12453, 2006  [article in pdf format]


D. Fiaschi et M. Marsili, « The Distribution of Wealth : Theoretical Microfoundations and Emirical Evidence », mimeo 2007,    [article in pdf format]


Zucman, G., “Les hauts patrimoines fuient-ils l’ISF? Une estimation sur la période 1995-2006 », [article in pdf format]


K. Dynan, J. Skinner, S. Zeldes, “Do the Rich Save More?”, Journal of Political Economy 2004 [article in pdf format]


K. Charles et E. Hust, « The Correlation of Wealth Across Generations », Journal of Political Economy 2003 [article in pdf format]


A. Bjorklund, J. Roine, D. Waldenstrom, “Intergenerational income mobility in Sweden: Combining equality of opportunity and capitalistic dynasties?”, mimeo 2008 [article in pdf format]



Weeks 4 & 5. Top Income Shares – Methods and Facts


(i) Warning : be careful with data sources


Income and wealth surveys (in France: Budget des familles, Emploi, Logement, Patrimoine, etc.) versus administrative tax files (RF, IR, ISF, ISu, IS, etc.)


On French surveys (codebooks and files), see Link toward Centre Maurice Halbwachs


Primary sources vs secondary sources.


On the danger of secondary data sets on inequality, see:


* A.B. Atkinson et A. Brandolini, « Promise and Pitfalls in the Use of « Secondary » Data-Sets : Income Inequality in OECD Countries as a Case Study », Journal of Economic Literature 39 (September 2001), pp.771-799 [article in pdf format]


A. Banerjee et E. Duflo, « Inequality and Growth : What Can the Data Say ? », mimeo, MIT, 2000 [article in pdf format]


K. Deininger et L. Squire, « A New Data Set Measuring Income Inequality », World Bank Economic Review 10 (3) (1996), pp.565-591 [Deininger-Squire data set]



(ii) Sources and methods to estimate top incomes: income tax tabulations and Pareto interpolations


** Exemple of pre-electronic primary data source: tabulations based upon French 1919 income tax returns

[tables 1919 (published in BSLC 1923) in pdf format] HC



** Course Notes D : Pareto interpolation techniques for income and wealth distributions

[Course Notes D (in html format)] HC


* T. Smeeding and J. Thompson, “Income from Wealth and Income from Labor: Stocks, Flows, and More Complete Measures of Well-Being”, mimeo 2006  [article in pdf format]



(iii) Results on top income shares in the long run: the end of rentiers (1914-1945), the rise of working rich (1979-2007)



** A.B. Atkinson, T. Piketty & E. Saez, “Top Incomes in the Long Run of History”, NBER Working Paper n°15048 (2009) (paper prepared for Journal of Economic Literature) [article in pdf format]

[Selected tables in pdf format] HC


Detailed cross-country studies:


A.B. Atkinson et T. Piketty (ed.), Top incomes over the twentieth century - A contrast between continental european and english-speaking countries, Oxford : Oxford university press, 2007


A.B. Atkinson et T. Piketty (éd.), Top incomes over the twentieth century – A global perspective, Oxford : Oxford university press, 2010


T. Piketty, Les hauts revenus en France au 20ème siècle – Inégalités et redistributions, 1901-1998, Grasset, 2001


** T. Piketty, « Income Inequality in France, 1901-1998 », Journal of Political Economy 111 (2003), 1004-1043 [article in pdf format] [Selected tables in pdf format]


** T. Piketty et E. Saez, « Income Inequality in the United States, 1913-1998 », Quarterly Journal of Economics 118 (2003), 1-39 [article in pdf format]  [Selected tables in pdf format]

See Emmanuel Saez’s web page for updated series until 2007



** C. Landais, "Les hauts revenus en France (1998-2006): Une explosion des inégalités ?", Mimeo, Paris School of Economics, 2007 [article in pdf format]

[Selected tables in pdf format] HC



(iv) What do we know about the rise of working rich & the top-end labor market?


** R. Burckhauser, S. Feng, S. Jenkins, and J. Larrimore, “Recent Trends in Top Income Shares in the USA: Reconciling Estimates from March CPS and IRS Tax Return Data”, mimeo, 2009 [article in pdf format]


* S. Kaplan and J. Rauh, “Wall Street and Main Street: What Contributes to the Rise of the Highest Incomes?”, Review of Financial Studies, 2009 [article in pdf format]


** M. Bertrand and S. Mullainathan, “Do CEOs Set Their Own Pay ? The Ones Without Principals Do”, Quarterly Journal of Economics 116 (3) (August 2001), pp.901-932 [article in pdf format]

[selected tables in pdf format] HC


* X. Gabaix and A. Landier, “Why Has CEO Pay Increased so Much?”, Quarterly Journal of Economics 2008 [article in pdf format]


** C. Frydman and R. Molloy, “Does Tax Policy Affect Executive Compensation? Evidence from Postwar Tax Reforms”, mimeo, 2009  [article in pdf format]


* R. Gordon, “Misperceptions about the Magnitude and Timing of Changes in American Income Inequality”, NBER Working Paper 15351 (2009)  [article in pdf format]


** J. Rotemberg, “Perceptions of Equity and the Distribution of Income”, Journal of Labor Economics 2002  [article in pdf format]




Part 2 : Optimal redistributive taxation and other policy responses


Week 6: Optimal redistributive taxation of labor income


(i) Observed patterns of marginal vs average tax rates on labor income


** Income tax schedule (France  2008)

  [tax schedules in excel format] HC


(ii) Theoretical models of optimal labor income tax rates


** Course Notes E : Optimal redistributive taxation of labor income

[Course Notes E (in html format)] HC


Mirrlees, J., "An exploration in the theory of optimum income taxation", Review of Economic Studies 38 (1971), 175-208.


P. Diamond, “Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Rates”, American Economic Review 88 (1998), 83-95 [article en format pdf]


* E. Saez, “Using Elasticities to Derive Optimal Income Tax Rates”, Review of Economic Studies 68 (1)  (2001), pp.205-229 [article en format pdf]


T. Piketty, « La redistribution fiscale face au chômage », Revue française d’économie 12 (1) (hiver 1997), pp.157-201 [article en format pdf]


(iii) Empirical estimates of high-income labor supply elasticity



** E. Saez, J. Slemrod and S. Gierz, “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review”, NBER Working Paper 15012 (2009) [article en format pdf]


* R. Chetty, “Is the Taxable Income Elasticity Sufficient To Calculate Deadweight Loss? The implications of evasion and avoidance”, AER 2009 [article en format pdf]



** M. Feldstein, “The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act”, Journal of Political Economy 103 (1995), 551-572 [article en format pdf]

 [selected tables in pdf format] HC


A. Goolsbee, “What Happens When You Tax the Rich? Evidence from Executive Compensation”, Journal of Political Economy (April 2000) [article en format pdf]


A. Goolsbee, “Evidence on the High-Income Laffer Curve from Six Decades of Tax Reform”, Brookings Papers on Economic Activity 1999:2.


R.H. Gordon et J. Slemrod, “Are “Real” Responses to Taxes Simply Income Shifting Between Corporate and Personal Tax Bases?”, in Does Atlas Shrug? – The Economic Consequences of Taxing the Rich, édité par J.B. Slemrod, Harvard University Press, 2000 [article en format pdf]


J. Gruber et E. Saez, “The Elasticity of Taxable Income: Evidence and Implications”, Journal of Public Economics 84 (2002), pp.1-32 [article en format pdf]


* T. Piketty, “Les hauts revenus face aux modifications des taux marginaux supérieurs de l’impôt sur le revenu en France, 1970-1996”, Economie et Prévision 138-139 (1999), 25-60 [article en format pdf]


E. Saez, “Reported Incomes and Marginal Tax Rates, 1960-2000 : Evidence and Policy Implications”, mimeo, Berkeley, 2003 [article en format pdf]


(iv) Empirical estimates of low-income labor supply elasticities


* B. Dormont, D. Fougère et A. Prieto, « L’effet de l’allocation unique dégressive sur la reprise d’emploi », mimeo, CREST, 2001 [article en format pdf]


* B. Meyer et D. Rosenbaulm, « Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers », Quarterly Journal of Economics 116 (3) (August 2001), pp.1063-1114 [article en format pdf]


* T. Piketty, “L’impact de l’allocation parentale d’éducation sur l’activité féminine et la fécondité, 1982-2002”, In : LEFEVRE C. (Ed.): Histoires de familles, histoires familiales, Les Cahiers de l'INED no 156, 2005, p. 79-109 [article en format pdf]

[selected tables in pdf format]


(iv) Empirical estimates of labor demand elasticities


D. Acemoglu at J. Angrist, “Consequences of Employment Protection? The Case of the Americans with Disabilities Act”, Journal of Political Economy 109(5) (2001), pp.915-957 [article en format pdf]


J. Gruber, “The Incidence of Mandated Maternity Benefits”, American Economic Review 84(3) (1994), pp.622-641 [article en format pdf] 


F. Kramarz et T. Philippon, « The Impact of Differential Payroll Tax Subsidies on Minimum Wage Employment », Journal of Public Economics 82 (1) (October 2001), pp.115-146 [article en format pdf]


K. Lang, “The Effect of Payroll Tax on Earnings: A Test of Competing Models of Wage Determination”, NBER Working Paper 9537 (2003) [article en format pdf]





Weeks 7 & 8: Optimal redistributive taxation of capital and capital income


(i) Overview of the various types of capital and capital income taxes


** Tax schedules for Wealth Tax (ISF) and Estate tax (France 2008)

  [tax schedules in excel format] HC


** T. Piketty et E. Saez, « How progressive is the U.S. federal tax system ? A historical and international perspective », Journal of economic perspectives, vol. 21, no 1, 2006 [article in pdf format]

[selected tables in pdf format] HC


** T. Piketty, « Wealth taxation in the 21st century: a personal view », In : Reforming the Tax System for the 21st Century: The Mirrlees Review, London : Institute for Fiscal Studies; Oxford : Oxford university press, 2008 [article in pdf format]


A. Auerbach, « The Future of Capital Taxation », mimeo, 2006  [article in pdf format]


(ii) Basic theoretical result 1: without inheritance, and with perfect capital markets, optimal k tax = 0%


Intuition: if 100% of capital accumulation comes from lifecycle savings, then taxing capital or capital income is equivalent to using differential commodity taxation (current consumption vs future consumption); Atkinson-Stiglitz: under fairly general conditions (separable preferences), differential commodity taxation is undesirable, and the optimal tax structure should rely entirely on direct taxation


(to put it differently: if inequality entirely comes from labor income inequality, then it is useless to tax capital; one should rely entirely on the redistributive taxation of labor income)


Papers on optimal indirect taxation:


A.B. Atkinson and J. Stiglitz, “The design of tax structure: direct vs indirect taxation”, Journal of Public Economics 6 (1976), 55-75


V. Christiansen, « Which Commodity Taxes Should Supplement the Income Tax ? », Journal of Public Economics 1984 [article en format pdf]


E. Saez, “The Desirability of Commodity Taxation under Non-Linear Income Taxation and Heterogeneous Tastes”, Journal of Public Economics 2002 [article en format pdf]


E. Saez, « Direct vs Indirect Tax Instruments for Redistribution : Short-run vs Long-run », Journal of Public Economics 2004 [article format pdf]




(iii) Basic theoretical result 2: with infinite-horizon dynasties, optimal linear k tax = 0%, but optimal progressive k tax > 0%



** Course Notes F : Optimal redistributive taxation of capital and capital income

[Course Notes F (in html format)] HC


R. Lucas, “Supply Side Economics: An Analytical Review”, Oxford Economic Papers 1990 [article in pdf format]


E. Saez, “Optimal Progressive Capital Income Taxes in the Infinite Horizon Model”, NBER Working Paper 2004 [article in pdf format]


(iv) Basic result 3: with imperfect k markets, optimal k tax > 0%


C. Chamley, “Capital Income Taxation, Wealth Distribution and Borrowing Constraints”, Journal of Public Economics 79 (1) (January 2001), pp.55-70 [article en format pdf]


* J. Conesa, S. Kitao and D. Krueger, “Taxing Capital? Not a Bad Idea After All!”, American Economic Review 2009 [article en format pdf]



 (v) Other recent papers on capital taxation


On capital taxation and governance:


M. Desai, A. Dyck, L. Zingales, « Theft and Taxes », Journal of Financial Economics, 2006 [article in pdf format]


R. Morck, “Why Some Double Taxation Might Make Sense: The Special Case of Inter-Corporate Dividends”, NBER Working Paper 9651 (2003) [article in pdf format]


R. Morck and B. Yeung, “Dividend Taxation and Corporate Governance”, Journal of Economic Perspectives 2005 [article in pdf format]


W. Kopczuk and J. Slemrod, “Putting Firms into Optimal Tax Theory”, American Economic Review 2006  [article in pdf format]


On informational rationales for taxing capital income:


H. Cremer, P. Pestieau et J.C. Rochet, “Capital Income Taxation when Inherited Wealth is Not Observable”, Journal of Public Economics 87 (2003), 2475-2490 [article en format pdf]


R. Gordon, « Taxation of Interest Income », NBER Working Paper 9503 (2003) [article en format pdf]


On private vs social discounting and negative capital taxation:


E. Farhi and I. Werning, “Progressive Estate Taxation”, mimeo 2008  [article in pdf format]


E. Farhi and I. Werning, “Inequality and Social Discounting”, Journal of Political Economy 2007  [article in pdf format]



(vi) Family wealth transmission and economic efficiency


** M. Bennedsen, F. Peres-Gonzalez, K. Nielsen and D. Wolfenzon, “Inside the Family Firm: The Role of Families in Succession Decisions and Performance”, Quartely Journal of Economics 2007   [article in pdf format]

[selected tables in pdf format] HC


* J. Brown, C. Coile, and S. Weisbenner, “The Effect of Inheritance Receipt on Retirement”, NBER Working Paper 12386, 2006 [article en format pdf]


F. Caselli et N. Gennaloll,  « Dynastic Management », Bread Working Paper 15 (2003) [article en format pdf]


D. Holtz-Eakin, D. Joulfaian et H.S. Rosen, « The Carnegie conjecture : some empirical evidence », Quarterly Journal of Economics 108 (May 1993), pp.288-307 [article en format pdf]


R.K. Morck, D.A. Strangeland et B. Yeung, « Inherited Wealth, Corporate Control and Economic Growth: the Canadian Desease? », in R.K. Morck, Concentrated Capital Ownership, NBER/University of Chicago Press, pp.319-369, 2000 [article en format pdf]


* F. Pérez-Gonzalez, “Inherited Control and Firms’ Performance”, American Economic Review, 2006 [article in pdf format]


* L. Bach, “Family CEO Successions and Firms Brankruptcies – Evidence from France”, mimeo, 2008 [article in pdf format]


* V. Grossmann and H. Strulik, “Should Continued Family Firms Face Lower Taxes Than Other Estates?”, mimeo 2008 [article in pdf format]